There is a lot of debate when companies enter into HRO contracts about how much best practice a HRO vendor can bring to the table. There is also much conversation around how much innovation and thought leadership the same HRO vendor can bring to innovating complex processes to bring savings to the customer. These two ideas are quite often in conflict and I’ll argue that you only want one of them.
The concept of HRO is a great one. A company on its own can only get so far with process efficiency on it’s own. Either they will spend lots of money with consultants to have their processes reengineered, or they can hire an HRO provider and spend lots of money on implementation. The problem with the former is that once in-house processes are reengineered they still have an insulated environment that is not subject to constant growth and evaluation from external sources. (The problem with the latter is that HRO is costly, and there is no guarantee that their practices are truly best practices – but that’s not today’s topic.)
But back to the topic at hand, what’s the tradeoff between innovation and best practices? I’ll argue that HRO customers don’t understand that in the HRO environment, innovation and best practices are exactly the same thing. How can this be you ask? When innovation is about thinking differently and best practices is about applying known knowledge, these ideas are opposites.
When an organization enters into an HRO contract, they really want to be standardized as much as possible to gain process and cost efficiencies. This means they want best practices applied to them. While the best practices may not be innovations to the HRO vendor, they are innovations to the customer – that is, the customer has not applied them because they are new concepts or new ways to work through a process.
An HRO customer should not truly want innovation from their business process vendor – it’s not what the vendor is good at. The vendor is good at processing for multiple clients and identifying what works well (better) across the client base and applying those practices to other clients as best practices. I’d suggest you don’t want your HRO vendor thinking outside the box – it might not work to your benefit all the time.
As you look for HRO vendors, look for vendors who have lots of clients in your profile (industry and around your same size). These are the vendors who have a good chance of understanding what best practices will work for you.